From the source: Loïc Réthoré, Nespresso

Nespresso today is a household name. This is probably thanks to George Clooney, who became the brand’s global ambassador in 2006 and likely introduced the coffee-pod concept to many of today’s loyal customers.

But in fact, the Swiss brand’s history goes back much further than that, to 1986, when the Nestlé subsidiary developed a then revolutionary system of portioned, encapsulated coffee and dedicated machines to deliver the perfect cup of coffee.

Over the years, Nespresso has continually improved and expanded its product range, and its retail offering has evolved along with it. While the company’s machines and capsules were initially sold exclusively through retail partners, it eventually established a direct-to-consumer channel. Nespresso launched an e-commerce site in 1998 and opened its first boutique in Paris in 2000.

Lately, the coffee-pod pioneer has been revamping stores globally to take customers on an experiential and educational journey about its products and long-held commitment to sustainability. (The retailer introduced its first capsule recycling program in Switzerland in 1991.) It just so happens that these topics have become major trends in the retail industry more broadly.

Here, Loïc Réthoré, head of Nestlé Nespresso in the Oceania region, explains what this new store concept will look like in Australia.

Inside Retail Weekly: What does Nespresso’s retail presence look like in the Australian market?

Loïc Réthoré: We have 20 bricks-and-mortar boutiques in Australia and an online retail channel, as well as an app that you can download and transact on. Our machines are also distributed across a wide network of electrical appliance retailers across the country.

IRW: A lot of brands that sell through a mix of retail and wholesale channels have started to focus more on direct-to-consumer (D2C) sales. Is that true for Nespresso too?

LR: Nespresso is very consumer-centric, and we deal intimately with consumers through all our channels – online and in our boutiques.

We see that as a key feature of Nespresso; it has always been very important for us to tell our story and hear our customers’ voices and hear what they actually have to say about the brand. It’s also a big part of our DNA to be very experiential; we think of ourselves as an experiential brand. That’s what the launch of the new boutique in the Sydney CBD is about – providing an experiential journey of the brand and an educational journey as well. It aims to provide a link between high-quality coffee and sustainability. We have a lot of stories to tell, and we know that our consumers are interested in knowing how we make, grind and roast the coffee.

The new boutique is all about providing a place where this experiential journey can take place.

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IRW: It must be difficult to provide that same sort of educational and experiential journey in non-Nespresso stores. How do you handle that?

LR: It’s easy because 100 per cent of our sales are direct-to-consumer. The machines that are sold through [other] retailers are imported by our machine partners directly and sold to the trade. So our sales are just what we do online and through our boutiques and call centres.

IRW: What are some of the other big trends impacting Nespresso now?

LR: Storytelling is a big trend in retail across the board, not only in Australia, but other countries too, and it creates an opportunity for
brands that excel at it. For example, at Nespresso, we have areas in our retail stores where staff are demonstrating and telling the brand story.

The other trend that we see is sustainability. A lot of consumers are interested in buying from brands that do business in a responsible way, whether it is sourcing, or the way they operate or product design. This has been a part of Nespresso from the start.

We have a vision called The Positive Cup that’s articulated around three pillars. The first pillar is about sourcing our coffee in a sustainable way. We have made a commitment that by 2020 we will source 100 per cent of our coffee through our AAA sustainability
program. This is something we set up that allows us to source [coffee] directly from farmers who we know are sustainable because
we help them to adopt different techniques and investments.

The second pillar is aluminium, which is the material we have chosen to use for the capsules. The first reason for this is that it’s the best material to protect the aromas of the coffee against the sun, humidity and oxygen. The second reason is that it’s one of the only materials that is infinitely recyclable. We also have an initiative called the Aluminium Stewardship Initiative that’s aimed at setting up standards for aluminium producers to produce it in a responsible way.

The last pillar is our carbon footprint. We want to reduce our carbon footprint by 20 per cent by 2020. That tells you our vision of sustainability, and we think it really resonates with consumers.

Sustainability is a key part of the choice everyone makes when they choose one brand over another, which is good news because we
have always worked with sustainability close to our hearts.

Another trend that I think is amplifying across many different countries is omnichannel. I think there was a certain stage when digital was exploding, and it’s still exploding, of course, whether e-commerce or social media. But what we have found is that consumers are not either/or, they’re both. They browse for information on the web, then go to a bricksand-mortar store to see if [a product] fits what they’re looking for. They might make the purchase in-store or online, but everything is intertwined, so there’s a possibility for brands to provide a consistent experience throughout all these different channels. That is where Nespresso’s focus on customer intimacy comes in, because we know [our customers] directly. We’re able to interact with them through social media, in our boutiques, on the phone in our call centres, as well as on the web through our chatbots to see how we can maximise their satisfaction.

IRW: With Nespresso’s product mix, do you find that customers tend to buy certain things like machines in-store, and other things like capsules online?

LR: One of the things we see is that consumers are quite loyal to their channel of acquisition, so customers who start their journey in a boutique might buy their machine in that channel, and even though we may send an email to see if they are eager to switch channels, they tend to stick to their channels because they like the experience.

I think one of the things that drives consumer behaviour in terms of channel choice is the experience they get. And that’s why customer intimacy is very important because the more you know your consumer, the more you’re able to adapt the experience, whether it’s online or bricks-and-mortar, to what they like.

IRW: Nespresso dominates the Australian market for coffeepod products, with something like 80 per cent of the market share, according to IBISWorld. Are you still focused on growing, or is it about defending your share against new players?

LR: As a pioneer of the category, our duty and aim is to make the pie grow. That’s what we’re all about. If you think about coffee consumption in Australia, of course it’s very welldeveloped and growing, but there are a lot of categories: there’s instant, roast and ground coffee, fresh-bean coffee and portion coffee. A lot of people mix coffee products. They might have a cup of Nespresso and

sometimes a cup of instant or roast and ground coffee, so penetration has not reached 100 per cent. It’s about being relevant to people who may drink another solution but might be open to adding Nespresso to their consumption pattern every day. We think we can grow the market.

IRW: Are you looking to do that by growing Nespresso’s physical presence in Australia? I understand you’re opening a new flagship on George Street in Sydney.

LR: The new boutique, which opens on November 14, is in addition to the Pitt Street boutique that we currently have, but we are closing that one early next year, so long term it won’t be an additional store. There is a view around where we should be long term, and I must say that we are well positioned in our footprint. The question is about what kind of experience we want to provide to customers
and where. We have many different formats, including flagships, boutiques in malls, pop-ups and a smart boutique, which is a fully
self-service boutique. We’re diversifying the number of formats to suit consumer shopping patterns in different areas, but our
priority will be in rolling out our new concept in different boutiques, including the new flagship in George Street. [The concept] is about storytelling and going on a sensory journey. This is what we think our consumers are actually looking for.

IRW: How does the new store concept differ from previous ones?

LR: We’ve divided these boutiques into three parts to focus on providing a sensory experience and telling our sustainability story.
The first part [in the front of the store] allows people to taste the product. There are tables where they can engage with coffee
specialists, taste our coffees and have a hands-on experience with the coffee grounds that are normally enclosed in the capsules, so
customers can smell and feel the difference between the different grounds and roasts.

The second part enables customers to continue their journey and see which accessories and machines they would like [to purchase]
and hear stories from our staff about how we roast and grind the coffee, and where it comes from. The third part, in the back of
the boutique, is what we call the laboratory. This is an area where [customers] can take time to do a comparative tasting if they want to
really understand which coffee they prefer. We have a coffee expert there conducting daily testings and talking with consumers, so it’s a place they can sit down and really enjoy a good chat about coffee. Now, what is so unique and different about this [concept] is that the wood we’re using is sourced 100 per cent from FSC trees, so it’s fully sustainable. The tabletops are also made out of recycled
coffee grounds and there are no more cash registers – all the transactions are done on tablets, so there’s a one-to-one interaction
with each coffee specialist. There’s a lot of fluidity in the experience.

We’ve rolled out this concept in a few boutiques in Australia and what strikes me when you walk into the boutiques is that you hear a lot of conversations. It sounds like an event; people are really engaged and are talking about coffee and asking questions.

One other thing that’s particular to the George Street flagship is that we’ve used a lot of sandstone to give it a local flavour. It’s the only one in the world that uses Sydney-sourced sandstone to replicate The Rocks.

IRW: Have customers noticed the difference?

LR: We have enjoyed good feedback so far. Because the boutique is fully open, customers can browse very easily. It’s all about exploration; it’s like an adventure.

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